The opinion of the court was delivered by: Denise Cote, District Judge
CORRECTED OPINION AND ORDER*fn1
This litigation raises the question of whether private label sellers may imitate the packaging of brand-name products which are sold side-by-side. Plaintiffs Johnson & Johnson and Johnson & Johnson Consumer Companies ("J&J") have moved for partial summary judgment on their Lanham Act and New York State Law claims in this action against Actavis Group hf and Actavis, Inc. ("Actavis"). For the reasons stated below, summary judgment is granted to J&J on Actavis's functionality defense, but is otherwise denied.
J&J sells the antibiotic ointment and cream NEOSPORIN(r). NEOSPORIN(r) is packaged in a box and tube that J&J asserts is distinguished by a gold/yellow background, a green color and particular typeface for the brand name, and a curving arrow in the gold/yellow color.*fn2 Through this motion, however, it seeks summary judgment on the background color alone, which it identifies as its Signature Gold Mark ("Gold Mark"). This color mark is unregistered, but J&J asserts that the mark has acquired secondary meaning and is entitled to protection.
Actavis manufactures private label antibiotic ointment and cream for many retailers, including such national retailers as CVS and Walgreens. Several of its customers have designed packaging that use a gold/yellow background color identical or virtually indistinguishable from the Gold Mark. While such packaging has been present in the marketplace for years, it has become more prominent in recent years, and was adopted by CVS and Walgreens for their private label antibiotic ointments in 2005. Actavis explains that its customers have designed their private label packaging generally, and for antibiotic creams in particular, to mimic that of national brand equivalents in order to "make it easier for their consumers to compare" the products.
Summary judgment may not be granted unless all of the submissions taken together "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party bears the burden of demonstrating the absence of a material factual question, and in making this determination the court must view all facts in the light most favorable to the non-moving party. Sista v. CDC Ixis N. Am., Inc., 445 F.3d 161, 169 (2d Cir. 2006).
J&J has moved for summary judgment on trademark and trade dress infringement claims pleaded under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); on the deceptive trade practices claim pleaded under New York General Business Law § 349; on the trademark dilution claim pleaded under New York General Business Law § 360-1; on claims of unfair competition and unjust enrichment pleaded under the common law of the State of New York; and on Actavis's affirmative defenses of laches, acquiescence and estoppel.*fn3 As noted, J&J has moved for partial summary judgment with respect to its Gold Mark alone. Its motion on the Lanham Act claims is further limited to the theory of initial interest confusion.
To prevail on a Section 43(a) claim, J&J must show, first, that its mark is entitled to protection and, second, that Actavis's use of the mark is likely to cause confusion. Louis Vuitton Malletier v. Dooney & Bourke, Inc., 454 F.3d 108, 115 (2d Cir. 2006). Disputed issues of fact exist with respect to both required showings.
A. Rights in the Gold Mark
A color mark is only entitled to protection if it has acquired secondary meaning. Id. at 116. Secondary meaning "is a term of art referencing a trademark's ability to identify the source of the product rather than the product itself." ITC Ltd. v. Punchgini, Inc., 482 F.3d 135, 167 (2d Cir. 2007) (citation omitted). Factors that are considered in determining whether a mark has developed secondary meaning include "(1) advertising expenditures, (2) consumer studies linking the mark to a source, (3) unsolicited media coverage of the product, (4) sales success, (5) attempts to plagiarize the mark, and, (6) length and exclusivity of the mark's use." Genessee Brewing Co., Inc. v. Stroh Brewing Co., 124 F.3d 137, 143 n.4 (2d Cir. 1997) (citation omitted). The careful weighing of evidence necessary to determining secondary meaning often renders this prong of a Lanham Act claim an unlikely candidate for summary judgment. See Coach Leatherware Co., Inc. v. AnnTaylor, Inc., 933 F.2d 162, 169 (2d Cir. 1991).
There are disputed issues of fact as to whether the Gold Mark has acquired secondary meaning. Much of the evidence on which J&J relies to establish secondary meaning in the Gold Mark could be used as well to show consumer recognition of the NEOSPORIN(r) brand name, which is indisputably a strong mark in its own right. This includes the product's sales success and advertising expenditures. Indeed, the advertising for the product emphasizes the brand name, and does not always emphasize or even include the Gold Mark. Although J&J is correct in asserting that its advertising need not explicitly direct the consumer's attention to the mark to constitute evidence of secondary meaning, see, e.g., Centaur Commc'ns, Ltd. v. A/S/M Commc'ns, Inc., 830 F.2d 1217, 1222-23 (2d Cir. 1987), advertisements are only relevant here to the extent they feature the Gold Mark and, thus, serve to link the NEOSPORIN(r) brand with the gold/yellow background color of its packaging.
The facts presented with respect to the other factors used in determining secondary meaning are also in dispute. For example, J&J relies on a survey conducted by the market research firm Guideline*fn4 to support its contention that the Gold Mark has acquired secondary meaning. It asserts that 54.6% of consumers in the study named NEOSPORIN(r) as a source of the product sold in a box bearing only the Gold Mark. But only 34% of consumers in the study named NEOSPORIN(r) as the only ointment sold in a package like the one they were shown. This percentage fell to 32% when the results from the control group were considered. Actavis further contends that the 32% figure is itself inflated because of flaws in the design of the survey. Actavis also points to studies conducted by Pfizer, a prior owner of NEOSPORIN(r), in connection with advertising recalls of their products which could be read to show low consumer recognition of the Gold Mark. Taken as a whole, while J&J's evidence of secondary meaning is sufficient for a jury to conclude that the Gold Mark has acquired distinctiveness in the marketplace, it is insufficient to establish secondary meaning as a matter of law.
J&J is entitled to summary judgment, however, on one aspect of its motion: Actavis's defense that the Gold Mark is functional. No mark is entitled to protection if a company's "competitors must be able to use [it] in order to effectively communicate information regarding their products to consumers." Star Indus., Inc. v. Baccardi & Co. Ltd., 412 F.3d 373, 382 (2d Cir. 2005). Thus, even if a mark is shown to have acquired secondary meaning, proof that the mark is functional will preclude protection. The burden of proving functionality rests on the defendant. Knitwaves, Inc. v. Lollytogs Ltd., 71 F.3d 996, 1006 (2d Cir. 1995).
A product feature is functional "if it is essential to the use or purpose of the article or if it affects the cost or quality of the article." TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 32 (2001) (citation omitted). For aesthetic rather than utilitarian product features, it is relevant to consider whether protecting the feature from infringement will place competitors at a "significant non-reputation-related disadvantage." Id. at 33. "Although sometimes color plays an important role (unrelated to source identification) in making a product more desirable, sometimes . . . color is not essential to a product's use or purpose and does not affect cost or quality." Qualitex Co. v. Jacobson Prod. Co., 514 U.S. 159, 165 (1995). When color is not essential in that way, the doctrine of functionality will not bar protection for color. Id. In other words, when color serves as a symbol to identify the source of the product and does not serve any other significant function, then it is protectable. Id. at 166. Thus, "[t]he ultimate test of aesthetic functionality . . . is whether the recognition of trademark rights would significantly hinder competition." Id. at 170 (citation omitted).
J&J has presented compelling evidence that the Gold Mark is not functional. Among other things, antibiotic ointments such as Polysporin come in boxes that do not use the Gold Mark. Actavis itself manufactures an antibiotic ointment for Wal-Mart that is sold in predominantly white packaging. Other colors, such as blue, white, and orange are prevalent in the packaging of first-aid products that are customarily sold in the aisle in which NEOSPORIN(r) and the Actavis products are found.
Apart from pointing generally to other first-aid products that incorporate some shade of yellow as one of the components of their packaging, including one line of the Bacitraycin Plus brand of antibiotic ointments, Actavis rests its functionality defense principally on the packaging of Band-Aid brand antibiotic bandages.*fn5 The box features a gold-colored drop meant to denote the antibiotic. As Actavis acknowledges, however, the ointment is actually white, not gold/yellow, and the colored drop is merely an aesthetic, not a utilitarian, feature. The fact that one brand of bandages uses a color to depict a drop of ointment that is similar to the Gold Mark used as a background color on the NEOSPORIN(r) packaging is insufficient for a jury to conclude that the Gold Mark is functional when used to sell antibiotic ointment. Actavis has simply failed to present sufficient ...